SEC Proposes Amendments to Implement JOBS Act

On December 19, 2014, the SEC approved the issuance of proposed amendments to revise the rules related to the thresholds for registration, termination of registration, and suspension of reporting under Section 12(g) of the Securities Exchange Act. Registration under the Exchange Act is accomplished on Form 10 or Form 8-A.

The SEC voted on a proposal that would implement the mandate of the JOBS Act by:

• Amending Exchange Act Rules 12g-1 through 4 and 12h-3 which govern the procedures relating to registration, termination of registration under Section 12(g), and suspension of reporting obligations under Section 15(d) to reflect the new thresholds established by the JOBS Act
• Revising the rules so that savings and loan holding companies are treated in a similar manner to banks and bank holding companies for the purposes of registration, termination of registration, or suspension of their Exchange Act reporting obligations
• Applying the definition of “accredited investor” in Securities Act Rule 501(a) to determinations as to which record holders are accredited investors for purposes of Exchange Act Section 12(g)(1).  The accredited investor determination would be made as of the last day of the fiscal year.

The proposal also would amend the definition of “held of record” to provide that when determining whether an issuer is required to register a class of equity securities with the Commission under the Exchange Act Section 12(g)(1), an issuer may exclude securities:

• Held by persons who received them under an employee compensation plan in transactions exempt from the registration requirements of Section 5 of the Securities Act or that did not involve a sale within the meaning of Section 2(a)(3) of the Securities Act
• In certain circumstances, held by persons who received them in exchange for securities received under an employee compensation plan

The Commission also is proposing a non-exclusive safe harbor under which a person will be deemed to have received the securities under an employee compensation plan if the person received them under a compensatory benefit plan in transactions that met the conditions of Securities Act Rule 701(c).

The JOBS Act revised Exchange Act Section 12(g) to raise the threshold at which an issuer is required to register a class of equity securities.  Under the revised threshold, an issuer that is not a bank or bank holding company is required to register a class of equity securities under the Exchange Act if it has more than $10 million of total assets and the securities are “held of record” by either 2,000 persons, or 500 persons who are not accredited investors.  An issuer that is a bank or bank holding company is required to register a class of equity securities if it has more than $10 million of total assets and the securities are “held of record” by 2,000 or more persons.

In addition, the JOBS Act raised the threshold at which a bank or a bank holding company may terminate or suspend the registration of a class of securities under the Exchange Act from 300 to 1,200 persons.  The JOBS Act also directed the Commission to revise the definition of “held of record” to exclude securities held by persons who received the securities under an “employee compensation plan” in transactions exempted from the registration requirements of Section 5 of the Securities Act and to create a safe harbor that issuers can follow when making that determination.

For more information, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, or by email at [email protected].  This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute legal advice on any specific matter, nor does this message create an attorney-client relationship.  Please note that the prior results discussed herein do not guarantee similar outcomes.

Hamilton & Associates | Securities Attorneys
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
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